Fran O'Sullivan: Time for NZ to take a stand over TPP

John Key will be aware Barack Obama needs to push the TPP through smartly.

If New Zealand Cabinet ministers really, really want to notch up the Trans Pacific Partnership (TPP) they could change tack.

Talk openly about what's at stake and make a stand against the move from some quarters in the United States to insist that rules on currency manipulation ("Hey - pot, kettle, black") are included in a deal whose parameters were set months ago by agreement between the 12 negotiating parties from around the Asia Pacific region.

Not just sit back while some US congressional players indulge in a shoddy late run which is likely to scupper TPP - even if Barack Obama wins trade promotion authority to finalise talks from the American side.

The Prime Minister and Trade Minister are well-placed for some open advocacy. John Key and Tim Groser were both at the World Economic Forum in Davos last week.

US Trade Representative Mike Froman - who was plugging both the TPP and the TTIP (Transatlantic Trade and Investment Partnership) - talked with Key (among the other leaders on his trade dance card). It's hardly surprising they talked about TPP. New Zealand took the initiative in building out the TPP, which now includes 12 negotiating parties. Not only that, this country is the repository for the deal and Ministry of Foreign Affairs deputy secretary David Walker, who is New Zealand's lead negotiator, has chaired some meetings.

So one could expect that the talks went a lot further than merely diplomatic chit-chat.

But there was little detail in Key's comments to the few New Zealand journalists in Davos, or those relayed to reporters back home.

Both Key and Groser are fully aware the talks are now at the crucial stage. There is a very narrow window indeed in the US political system for Obama to get TPP through Congress before he enters his presidency's lame duck era.

Obama indicated last week that TPP was a legacy project for his Administration.

If so, caving in to latent protectionism over currency should not be part of it - let alone be entertained.

The prohibition against currency manipulation is clearly aimed at Asian countries. While China is not part of this negotiating round of the TPP it may seek to accede to the deal in the future (assuming TPP is concluded).

But China is not alone in taking actions that have currency spillovers. The reality is that when it comes to currency manipulation the US is hardly immune to criticism.

After all, the US Federal Reserve's programme of quantitative easing drove the value of the US dollar down by increasing the amount of dollars in circulation. This helped revive manufacturing and made US exports more competitive.

It wasn't direct currency manipulation (arguably the New Zealand Reserve Bank does this when it makes the occasional market intervention), but the upshot is similar.

Two US lobbies - the motor industry executives and the steelmakers union - have tried this on before, notably during talks on the ill-fated Free Trade Area of the Americas where negotiations between the 34 American nations came to a standstill after five years.

They were then and remain now protectionist minded.

This topic has been bubbling away since November.

But it came to the fore again in the past week after Obama announced in his State of the Union address that he was putting TPP (Asia-Pacific) and the TTIP (Europe-US) high up his agenda.

Obama argues the deal will boost US exports and lower tariffs for US goods in the Asia Pacific.

Time for Key and Groser to help stiffen the US President's resolve and make it clear New Zealand will not agree to any expansion of the TPP to include clauses against currency manipulation.